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By DAN REYNOLDS, senior editor of Risk & Insurance®

A study by professors at Stanford and Columbia universities points to the weaknesses that healthcare insurance reformers in Massachusetts knew they would have to tackle eventually.

"Because the plan's main components are the same as those of the new health reform law, the effects of the plan provide a window into the country's future," the authors wrote in a report published earlier this year by in the academic journal Forum for Health Economics & Policy.

Authors John Cogan and Daniel Kessler of Stanford and Glenn Hubbard of Columbia unearthed data that points, most dramatically, to an average 21.7 percent premium growth for employer-sponsored, family healthcare coverage for private-sector employees since healthcare reform was passed in Massachusetts in 2006.

When reformers in Massachusetts set about increasing the number of people covered by health insurance, they concentrated on increasing the number of people covered and not so much on the cost increases that would result. Critics claimed the reforms addressed only half the issue--the number of uncovered lives--while never going far enough to address the burgeoning costs.

On the first point, the reforms were successful. All told, more than 430,000 Massachusetts residents have secured coverage since the reforms were enacted.

But this was in a state where health insurance premiums were already the highest in the country.

Now, according to the Cogan, Hubbard and Kessler paper, titled, "The Effect of Massachusetts' Health Reform on Employer-Sponsored Insurance Premiums," increases in employer-sponsored premiums are outpacing those in the rest of the country.

According to the study, single-coverage premiums among all private-sector employers in Massachusetts rose by 8.7 percent between 2006 and 2008. That's 2.2 percentage points more than the 6.5 percent growth in the United States as a whole.

Single-coverage private-sector premiums in Boston have exploded, rising 11.9 percent in 2006 through 2008 and outpacing the 5.2 percent growth they exhibited in 2004 through 2006.

It was among small employers that reformers of Bay State healthcare insurance knew they would find the largest number of the newly insured, and the research done by Cogan, Hubbard and Kessler also bears this out.

It was also among small business owners that critics said the cost increases would hit especially hard. And yes, according to the study, the increases in employer-sponsored family coverage take a deep bite into the pockets of small business owners and their employees.

Businesses in Massachusetts with fewer than 50 employees saw their health insurance premiums grow by 14.7 percent between 2006 and 2008, the study found. That's more than double the prereform rate of 7.1 percent between 2004 and 2006.

Massachusetts Gov. Deval Patrick is now battling with insurers over his administration's attempts to cap premium increases that the state's health insurers say they must have to stay in business.

July 8, 2010

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